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Tuesday, October 30, 2012

The Importance of Fiction

Georgia Tech's Athletic Director, Dan Radakovich, resigned yesterday to take up the AD position at Clemson. There were rumors early on in the summer that Radakovich was seriously considering the move even as he denounced the rumors and reaffirmed his enthusiasm for his current job.

When I was reading that story on the AJC, I couldn't help but think of this guy:

Remember this guy? Mohammed Saeed al-Sahhaf? AKA Baghdad Bob? This dude was the Iraqi Information Minister under Saddam Hussein who broadcasted grossly unrealistic propaganda stating that the American armed forces were weak whereas the Iraqi army was invincible. His last broadcast was on April 8, 2003 stating that the Americans would surrender. The capital city of Baghdad was liberated (or captured, depending on your perspective) by American and British forces 4 days later.

The reason why I brought this up is because to the outside world, Baghdad Bob was comical in the sense that everybody who had access to accurate reports about the war knew that he was lying in the face of incontrovertible proof that Coalition forces were decimating the Iraqi army. But perhaps to the Baghdadi on the street, his word was truth. After all, Iraq had lived under the tyranny of Hussein for over 20 years and their word was law. Who could say otherwise?

And these are not isolated occurrences. Everybody does this. Back in 2008, when the economy was in free fall and General Motors was hemorrhaging cash, its former CEO, Rick Wagoner, famously stated that "bankruptcy is not a viable option". 7 months later, the company filed for Chapter 11 bankruptcy, almost 101 years after the company was founded.

It was clear to any knowledgeable person that GM was headed for some sort of bankruptcy. The company had been losing billions of dollars every quarter and had huge amounts of legacy costs. So why did the company's top management so adamantly deny that they would file for bankruptcy? Because they didn't want to lose public confidence. The thinking was that if the public thought GM would go bankrupt, they'd stop buying their cars and the company would go into bankruptcy even faster than they did.

The name of the game has always been about reassuring the lay public, even as Rome burns all around them. Because most people simply don't follow these issues, many of them can be fooled by public statements of reassurance. Even as the smart money knows it's time to exit, as long as the majority remains unaware of the true extent of the damage, then some purpose will have been served.

You don't need to fool all of the people. Just fooling some can be enough to buy a little more time, even in the face of worsening odds. Greece is currently in the midst of an economic depression, and its leaders are adamantly stating that they will remain in the Euro zone and that a Greek exit (Grexit) simply "isn't an option".

These are the necessary fictions that we tell ourselves and the public. Because everything is fine and dandy until it isn't. And then you're left to fend for yourself.